iCloud is a cloud-storage software offered on all Apple devices since 2011. It can securely keep your photos, music, videos, documents, and apps on the cloud server for easy access at anytime.
This guide is a good overview of what is iCloud Music Library and how you use it. Apple itself thinks about it as all the music you have stored in iCloud — a personal repository online with tracks matching the ones from the iTunes Store
An additional perk of having iCloud is that it comes with a free email account. So if you have an Apple ID, you by default have an iCloud email account.